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FOREX-Dollar wallows at multi-month lows as Fed bangs dovish drum; kiwi jumps

    * Fed officials reiterate views for transient inflation
spike
    * Euro trades near key $1.2250 level as region's recovery
quickens
    * Yuan in focus after Tuesday's push to three-year high 
    * Kiwi dollar jumps after RBNZ recommits to monetary
stimulus

    By Kevin Buckland
    TOKYO, May 26 (Reuters) - The dollar wallowed near its
weakest since early January against major peers on Wednesday, as
Treasury yields eased amid Federal Reserve insistence that
stimulus will continue despite current inflationary pressures.
    The euro traded around the key $1.2250 level,
holding gains from Tuesday when it pushed as high as $1.2266 for
the first time since Jan. 8, as Europe's pandemic recovery picks
up pace, closing the gap with the U.S.
    The dollar index, which gauges the greenback against
six rivals, languished at 89.665 early in Asia, after pushing as
low as 89.533 on Tuesday.
    New Zealand's currency rose after the central bank
said it would maintain stimulatory monetary policy settings
until its inflation and employment targets are achieved. The
kiwi dollar last traded 0.6% higher at $0.72692.
    Meanwhile, traders will be watching the Chinese yuan after
it rose to an almost three-year high of 6.3925 per dollar on
Tuesday in the offshore market, before last changing
hands at 6.4012.
    A host of Fed officials overnight echoed the sentiments of
Chair Jerome Powell that a spike in inflation will be transient
and ultra-easy policy continues to be warranted.
    "I have not seen anything yet to persuade me to change my
full support of our accommodative stance," Chicago Fed President
Charles Evans said in a speech on Tuesday.
    "Right now, policy is in a very good place," San Francisco
Fed President Mary Daly told CNBC the same day. "We need to be
patient."
    A potential test of that conviction comes Friday, with new
readings on U.S. core consumer prices and a survey of purchasing
managers.
    The dollar has declined over the past two months on the
belief that low U.S. rates will drive cash abroad to capture
gains now that other economies are beginning to recover more
quickly from the pandemic.
    "Confidence in the outlook for the recovery in the
Eurozone has been increasing," buoying the euro, Rabobank
strategist Jane Foley wrote in a report. 
    "The conviction of Fed officials that this year’s price
pressure will be transient suggests there is no real reason to
suspect any significant rowing back of monetary policy
accommodations in the near-term," which is undermining the
dollar, she said.
    The yield on benchmark 10-year Treasury notes
hovered at 1.5723%, near the 1.5540% mark reached overnight for
the first time since May 7's payrolls shock.
    The yen, which is also sensitive to declines in
yields, hovered around the middle of its approximately
108.4-109.7 per dollar trading range this month, last changing
hands at 108.74.
    The Chinese yuan strengthened as far as 6.3925 per dollar on
Tuesday in offshore trading, piercing the psychological 6.40
boundary for the first time since mid-2018.
    China's major state-owned banks were seen buying U.S.
dollars at around 6.40 yuan in the Asian afternoon in a move
viewed as an effort to cool the rally in the onshore yuan,
sources said.
    "Amid conflicting reports from Chinese officials in recent
days about their attitude to the currency, our read here is that
6.40 is not a hard line in the sand, and that in the context of
further downward pressure on the USD more generally, it will be
‘allowed’ to trade lower," National Australia Bank strategist
Ray Attrill wrote in a report, reiterating a forecast for 6.35
yuan per dollar by end-June. 
    
========================================================
    Currency bid prices at 0210 GMT
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar                  $1.2248        $1.2252     -0.03%         +0.25%      +1.2257     +1.2242
 Dollar/Yen                   108.7300       108.7350    +0.00%         +5.28%      +108.8150   +108.7350
 Euro/Yen         <EURJPY=EB  133.17         133.23      -0.05%         +4.92%      +133.3100   +133.1400
                  S>                                                                            
 Dollar/Swiss                 0.8950         0.8955      -0.06%         +1.16%      +0.8957     +0.8950
 Sterling/Dollar              1.4145         1.4149      -0.01%         +3.55%      +1.4152     +1.4140
 Dollar/Canadian              1.2053         1.2062      -0.03%         -5.31%      +1.2067     +1.2057
 Aussie/Dollar                0.7769         0.7754      +0.21%         +1.01%      +0.7770     +0.7749
 NZ                           0.7277         0.7227      +0.68%         +1.32%      +0.7277     +0.7223
 Dollar/Dollar All spots
Tokyo spots
Europe spots 
Volatilities 
Tokyo Forex market info from BOJ 
    

    
 (Reporting by Kevin Buckland; Editing by Lincoln Feast.)
  
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